Arbitrators called to settle Barry Callebaut and Petra Foods pay spat

$860m, $762m or something in between: Arbitrators to decide how much Barry Callebaut will pay for Petra Foods' cocoa ingredients division

Barry Callebaut and Petra Foods have called on arbitrators to resolve a dispute over payment terms from the sale of Petra’s cocoa ingredients business to Barry Callebaut.

Barry Callebaut acquired Petra Foods’ cocoa processing division for a price written into a sale and purchase agreement (SPA) of $860m on 30 June 2013.

Singapore-based Petra Foods has accused Barry Callebaut of ducking out on almost $100m three months later by adjusting the payment price in the SPA, while Barry Callebaut says it had every right to alter the payment terms.

Draft completion statement​

At the heart of the matter is a draft completion statement issued by Barry Callebaut in September this year, which sought to adjust payment terms, bringing the price down $98m to around $762m based on a revaluation of Petra Foods' former ingredients division.

Petra Foods contends that the draft completion statement is not compliant with the SPA and the law, while Barry Callebaut claims it represents part of the SPA.

The Singapore International Arbitration Centre will now decide on a fair purchase price.

Petra dissolves Ivorian subsidiary​

Petra Foods this week announced that it would dissolve Ivorian subsidiary Delfi Cocoa Cote d’Ivoire, which was responsible for cocoa sourcing and processing.

The company said that the subsidiary no longer served its purpose following the sale of Petra’s ingredients arm.

Strength in emerging markets at a premium​

Under the Petra Foods ingredients deal, Barry Callebaut took control of six cocoa processing facilities (Indonesia, Malaysia, Thailand, Brazil, Mexico and Germany) and one cocoa butter facility (France).

Barry Callebaut CEO Juergen Steinemann previously said the deal would strengthen the company’s position in the emerging Asian and Latin American markets.

When the acquisition was announced in December last year, analysts agreed​ that the Petra buy made strategic sense, but said that at 14 times the division’s 2011 operating profit the price was no bargain.

Before Callebaut acquired the business, Petra Foods’ Ingredients division suffered a CHF 40m ($44m) EBIT loss in the first half of 2013. Callebaut expects the business to record EBIT profit of CHF 30m ($34m) in fiscal 2013/14.